Simon Coveney (Cork South Central, Fine Gael) | Oireachtas source

I thank the committee for the opportunity to attend. In truth, unlike most other Supplementary Estimates, as the committee will see in a few minutes, this is not the Department of Defence asking for more money. Essentially, this is about facilitating the movement of money within the Defence Forces to deal with an issue with Army pensions. Also, within the Defence Vote, this is about facilitating the purchase of a new ship because there was an opportunity to buy one at good value. We will have an opportunity to discuss the matter.

I thank the committee for the opportunity to present, for its consideration, the 2014 Supplementary Estimates on Votes 35 and 36. Vote 35 is the Army Pensions Vote and Vote 36 is the Defence Vote. They are two separate Estimates. I shall commence with a short statement setting out the background to these Supplementary Estimates.

For 2014, a Supplementary Estimate is required to address a net shortfall of €4.8 million arising on the Army Pensions Vote, while a technical Supplementary Estimate is required within the Defence Vote to facilitate payments under the naval vessel replacement programme. At the outset, I should explain that the Supplementary Estimates sought are on an Exchequer neutral basis and all additional funding requirements will be achieved from within the overall Defence sector envelope for 2014.

I will start with the Army Pensions Vote which makes provision for retired pay, pensions, allowances and gratuities payable to or in respect of members of the Defence Forces. The 2014 Estimate provides a net sum of €215.4 million for the Army Pensions Vote. However, the net outturn this year is expected to be €220.2 million, leaving a net shortfall of €4.8 million. This amount will be funded by savings on the Defence Vote.

Subhead A.2 is the largest subhead of the Army Pensions Vote. It covers expenditure on all superannuation benefits for former members of the Permanent Defence Force and their dependants. It accounts for over 95% of all military pensions expenditure, including gratuities, and is primarily demand-driven and non-discretionary. The original provision of some €210.6 million for this subhead will not be sufficient to meet all requirements for the year. A shortfall on this subhead of the Vote is estimated at €6.12 million.

The principal reasons for the shortfall in this subhead are the continued underlying increase in the numbers of retirement pensioners being paid from the Vote and the ongoing impact on pension payments of the exceptionally high numbers of retirements on pension in previous years. In addition, many retirees continue to be in the long service category and are, therefore, entitled to maximum retirement benefits which contributes to the increased costs.

The numbers of Defence Forces pensioners has continued to rise during the past year, and, currently, there are some 12,000 military pensioners of all categories paid by the Department of Defence, a net increase of some 1,000 since 2007. Some 1,770 military personnel have retired on pension between January 2010 and the end of last year and it is anticipated that another 240 will have retired on pension by the end of this year.
The increasing number of retirements has resulted in a reduction in the number of serving personnel; however, in line with the Government’s objective of maintaining the strength of the permanent defence forces, I am happy to inform the committee that a targeted recruitment campaign has so far seen the enlistment of 385 permanent defence force recruits, 37 cadets and 15 aircraft apprentices in 2014. Three medical officers have also been appointed.
The overall supplementary requirement on Subhead A.2 will be offset by expected savings of €1.42 million on Subheads A3, A4, A5 and A6 of the Army Pensions Vote. A shortfall of €100,000 is now expected in receipts, and it is intended to meet this from surplus receipts on the Defence Vote. When all issues are taken into account, the net shortfall on the Army Pensions Vote is €4.8 million.
I would now like to turn to the Defence Votewhere a transfer between subheads within the Vote is required to facilitate payments under the naval vessel replacement programme. By way of background, earlier this year, An Taoiseach, who was then Minister for Defence, announcedthat an order was to be placed for a third new offshore patrol vessel for the Naval Service. This was provided for under the existing contract which has already delivered the first vessel, the LE Samuel Beckettearlier this year. The second vessel, the LE James Joyce, will be delivered in 2015. By taking up this option under the existing contract, the Department of Defence ensured that the third ship would be bought at 2012 prices and would not be index linked. The acquisition of these modern new vessels, combined with a continuous process of refurbishment and repair, will ensure that the operational capability of the Naval Service is maintained.
The 2014 Estimate provides a net sum of some €640 million for the Defence Vote. Payments relating to the purchase of ships are made from the Naval Subhead, A11. The original 2014 subhead allocation for this subhead was €36.6 million, however, due to increased commitments under the naval vessel replacement programme, the projected outturn on this subhead is €69.4 million. An adjustment within the Vote of €32.8 million is therefore required. Offsetting savings will be met from the pay and allowances subheads on Vote 36 as follows: €25.8 million on Subhead A3 permanent defence force pay, €1 million on Subhead A4 permanent defence force allowances, €1 million on A5 reserve defence force pay and €4.999 million on Subhead A7 civilian employees pay to provide for the technical Supplementary Estimate of €1,000.
The purchase of the three vessels will all have been funded directly from savings generated within the Defence Vote – a considerable achievement when viewed against the economic backdrop of recent years. This has been made possible through careful monitoring and management of expenditure within the Department and the prioritisation of this essential project while also maintaining a focus on the delivery of other key outputs. The acquisition of these new vessels, with the latest equipment, will ensure that the Naval Service will be fully equipped to carry out its day-to-day roles in meeting Ireland’s obligations in the areas of fishery protection, maritime safety and security.
I take this opportunity to wish all retired Defence Force personnel and those serving in the Defence Force, as well as the reserve Defence Force personnel a happy Christmas.
The Estimates reflect the reality that the pensions bill has increased somewhat but we have accommodated it within our Vote. We have taken the opportunity this year to make a further acquisition under the fleet replacement programme in the Naval Service. We are saving the State a considerable amount of money by availing of the offer from the yard in which the third ship will be built. The careful management of pay and allowances has allowed us to accumulate the money to do that while at the same time the Defence Force will be at its full complement of 9,500 serving personnel at the end of the year.
I will be happy to answer questions.